A New Spin on Housing Affordabilityuli.org/wp-content/uploads/ULI-Documents/JBurnsANewSpin.pdf · CURRENT SFR PORTFOLIO DEBT TRENDS Hard Money Community Banks Regional Banks Money

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A New Spin on Housing Affordability:

Rethinking Single Family Rental Housing’s Evolution and Role

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Kohler

January 30, 2013

John Burns, CEO

SF Rental Housing Market Overview

Presented on:

November 6, 2013

Presented by:

John Burns, CEO

949-870-1210

[email protected]

Trusted Analysis for Executive Decisions



mailto:[email protected]

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11% of the US housing stock is rental homes

and condominiums.

Source: John Burns Real Estate Consulting. Use of this info without permission not allowed.



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9,001,987

11,847,201

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000

11,000,000

12,000,000

20061

20062

20063

20064

20071

20072

20073

20074

20081

20082

20083

20084

20091

20092

20093

20094

20101

20102

20103

20104

20111

20112

20113

20114

20121

20122

20123

20124

20131

20132

Year and Quarter

Single-Family Rental Homes

2.8 million SF Rental Homes (31% growth) Added in

the last 7 years.




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2,028,116

2,618,855

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

2,200,000

2,400,000

2,600,000

2,800,000

3,000,000

20061

20062

20063

20064

20071

20072

20073

20074

20081

20082

20083

20084

20091

20092

20093

20094

20101

20102

20103

20104

20111

20112

20113

20114

20121

20122

20123

20124

20131

20132

Year and Quarter

Rented Condominiums

600K Rental Condos (14% growth) Added in the last

7 years.




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79,137,87577,208,535

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

50,000,000

55,000,000

60,000,000

65,000,000

70,000,000

75,000,000

80,000,000

20061

20062

20063

20064

20071

20072

20073

20074

20081

20082

20083

20084

20091

20092

20093

20094

20101

20102

20103

20104

20111

20112

20113

20114

20121

20122

20123

20124

20131

20132

Year and Quarter

Owned Homes

1.9 Million Fewer Homeowners than 7 years ago.




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Opportunity funds and Investors from all over the world see

SAFETY and OPPORTUNITY in U.S. housing



http://www.waypointhomes.com/index?lang=en

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Investor sales hit an all-time high this year.

Q3 data will show that they declined.

Source: John Burns Real Estate Consulting Regional Analysis and Forecast, October 2013





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9

US Home Values Fell 27% from 2007–2011

but have risen 17% in 2 years.

7%

10%11%

15%

13%

0%

-7%

-13%

-3%-4%

-3%

6%

11%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013P

Burns Home Value Index Appreciation (Dec-Dec)

Source: John Burns Real Estate Consulting US Housing Analysis and Forecast, Oct 2013. Use of this info without permission not allowed.



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The Result has been a lot of price

appreciation in the last 3 years!

Source: John Burns Real Estate Consulting Regional Analysis and Forecast, Sept. 2013





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This Will Be a Payment Driven Recovery – payments were

23% of income, and are now 29% (34% is the norm).

Source: John Burns Real Estate Consulting US Housing Analysis and Forecast, Sept. 2013



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Payments Are Still Affordable and Payment-to-

Income Ratios Are Below Average in Most Markets

Below historical average

At historical average

Above historical average

Source: John Burns Real Estate Consulting, LLC (Published Oct. 2013)

66%

85%

60%

58%

36%

45%

29%

34%

33%

23%

34%

23%

26%

27%

24%

28%

23%

23%

27%

16%

25%

25%

54%

76%

53%

51%

32%

42%

27%

34%

33%

24%

36%

25%

28%

30%

27%

32%

27%

27%

32%

22%

32%

33%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Orange County, CA (MDiv)

San Francisco, CA (MDiv)

Los Angeles, CA (MDiv)

San Diego, CA

Portland, OR-WA

Seattle, WA (MDiv)

Austin, TX

Denver, CO

Washington, DC (MSA)

Houston, TX

Riverside-San Bernardino, CA

Dallas/Fort Worth, TX (MSA)

Phoenix, AZ

Raleigh-Cary, NC

Orlando, FL

United States

Minneapolis, MN-WI

Tampa, FL

Charlotte, NC-SC

Atlanta, GA

Las Vegas, NV

Chicago, IL (MDiv)

Payment-to-Income Ratios

HistoricalAverage

Current





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Source: John Burns Real Estate Consulting US Housing Analysis and Forecast, Sept. 2013

More than a Price Driven Recovery – prices

are clearly above the norm



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8.6

7.6

11.1

7.9

4.8

5.8

4.5

4.3

4.5

3.7

3.8

3.4

3.0

3.1

3.1

3.0

3.5

3.1

3.5

3.2

3.3

2.0

5.0

5.0

7.4

5.2

3.2

4.1

3.3

3.2

3.5

3.1

3.2

2.8

2.6

2.7

2.7

2.6

3.2

2.7

3.2

3.0

3.1

2.1

0.0 2.0 4.0 6.0 8.0 10.0 12.0

Orange County, CA (MDiv)

San Diego, CA

San Francisco, CA (MDiv)

Los Angeles, CA (MDiv)

Portland, OR-WA

Seattle, WA (MDiv)

Denver, CO

Washington, DC (MSA)

Riverside-San Bernardino, CA

United States

Austin, TX

Phoenix, AZ

Minneapolis, MN-WI

Orlando, FL

Houston, TX

Tampa, FL

Charlotte, NC-SC

Dallas/Fort Worth, TX (MSA)

Raleigh-Cary, NC

Las Vegas, NV

Chicago, IL (MDiv)

Atlanta, GA

Price-to-Income Ratios

HistoricalAverage

Current

Prices are High and Price-to-Income Ratios Are

Now Above Average in 19 of the Top 20 Markets

Below historical average

Above historical average

Source: John Burns Real Estate Consulting,

LLC (Published Oct. 2013)





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A huge portion of the recovery should be driven

by those who lost their home to foreclosure.

Source: “Boomerang Buyers Flying Back into the Market,” John Burns Real Estate Consulting.

White paper with all markets published February 2013. Use of this info without permission not allowed.

Projected Boomerang Buyers

(includes only those who lost their home prior to Jan. 2013)





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26% of our Estimated 3.3 million Boomerang

Buyers will come from 10 MSAs.

Source: “Boomerang Buyers Flying Back into the Market,” John Burns Real Estate Consulting.

White paper with all markets published February 2013. Use of this info without permission not allowed.





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1. Now that Price/Income ratios exceed

historical norms, are distressed homes still a

great trade for institutional investors

promising high teen returns?

2. Will the Boomerang buyer return to

homeownership, reducing SF rental

occupancy or putting downward pressure on

rents, or continue to rent?

3. Could a future downturn be exacerbated by

investor owners?

Three key questions to ponder as the

Professional SF Rental model emerges.





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CURRENT SFR PORTFOLIO DEBT TRENDS

Hard Money Community Banks Regional Banks Money Center Banks Institutional Non-Bank / MBS

Size $500K to $10MM $1MM to $5MM $1MM to $25MM $100MM+ $3MM to $100MM

Rate 8.0% to 14.0% 4.25% to 6.5% 4.5% to 6.5% 3.5% to 5.0% 5.0% to 6.5%

Rate Type Fixed Fixed Fixed Floating Varies

Term 1 to 2 Years 3 to 5 Years 3 to 5 Years 3 to 5 Years 5 to 10 Years

LTV Up to 75% Up to 65% Up to 65% Up to 65% Up to 80%

Pre-Pay Penalty No No No Yes Yes

DSCR 0 – 1.25 1.20 1.25 1.25 1.25

Recourse Varies Yes Yes Yes No

Advantages Speed Acquisitions No Pre-Pay

Rate No-Pre-Pay

Rate No Pre-Pay

Rate Geography

Size Proceeds

Speed Geography

Non-Recourse

Constraints Size Rate

Geography

Geography Recourse Proceeds

Speed

Recourse Proceeds

Speed

Recourse Proceeds

Speed

Pre-Pay Penalty



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